Commentary on development, globalization, and trade by Jonathan Dingel.

The distribution of ag subsidy income

The “average” farm household in the United States is little affected by the trade reforms currently being contemplated in Geneva, but these reforms imply significant losses primarily for the very richest households involved in production of highly protected commodities. Meanwhile, in the developing world, many of the benefits of rich country agricultural liberalisation are translated into reduced poverty….

[I]n the United States, farm income accounts for less than 10% of total income of farm households… [O]ur estimates of the impact of Doha on the average farm household’s income suggest that it is statistically indistinguishable from zero! If this is the case, then what is the source of such strong opposition to reform?… In the United States, most farm households earn relatively little from farming, but those large farms producing sensitive products tend to be specialised, with the richest deriving up to 90% of their income from agriculture…

In contrast to the negligible impacts on the average US farm household, full agricultural trade liberalisation would cut the total income of the wealthiest rice farmers by about 19% and that of cotton farmers by 10%… It is these wealthy, highly specialised households in a few heavily protected sectors that stand in the way of serious agricultural reform in the US. Indeed, around one half of producer revenue in the US rice and sugar sectors over the period 2001-2005 were attributable to farm programs., while more than a third of cotton revenues are directly attributable to government programs. This sharp concentration of potential losses among a relatively small number of influential households has made reform in the US difficult indeed.

Read the full column for other important insights into agriculture at the Doha Round.